Bipartisan Legislation Limiting Mandatory Arbitration of Sexual Harassment or Assault Claims Requires Employers to Re-Examine Employment Arbitration Agreements

Topics: Arbitration Agreements, Discrimination, Harassment & Retaliation

Over the course of three days, the House and Senate passed HR 4445, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, amending the Federal Arbitration Act (FAA) that is expected to be signed into law by President Biden in short order.

HR 4445 intends to prohibit mandatory arbitration of employee claims of sexual harassment or sexual assault. The new law will not void or render existing arbitration agreements unenforceable but will allow employees alleging sexual harassment or sexual assault to opt out of existing arbitration agreements.  In addition, the enrolled bill appears to permit plaintiffs the ability to opt-out of any pre-dispute waiver of class action or representative status provisions that employers have used to eliminate potential class action sexual harassment or sexual assault claims.

HR 4445, on its face, will apply narrowly to claims asserting a sexual assault under 18 USC 2246 and, more broadly, to conduct that is alleged to constitute sexual harassment under Federal, Tribal or State laws.

Finally, HR 4445 ensures that any disputes about the enforceability of an arbitration agreement are to be decided in court, not by an arbitrator, even where the arbitration agreement provides for arbitrability issues to be decided by an arbitrator.

The statute does not have a retroactivity provision and should only apply to disputes that arise after the law is effective.  As the courts interpret this new law, we will learn whether claims other than sexual assault or harassment, which are alleged in the same action, are required to be arbitrated separately, while HR 4445 claims are resolved in the courts.

Currently the Federal courts are working through some similar issues including whether California’s AB 51, which attempted to ban most employment arbitration, is preempted or barred by Federal law.  AB 51 is currently enjoined.  Similarly, on March 30, 2022, the United States Supreme Court will hear Viking River Cruises, Inc. v. Moriana, Case No. 20-1573, to decide whether the FAA preempts California court decisions that currently allow employees to bring California Private Attorney General Act representative claims to circumvent their arbitration agreements that waived class or representative participation. HR 4445 adds another issue to the employment arbitration pie that the Courts will be addressing.

The new law provides an opportune time for all employers to have their favorite CDF Labor Law lawyer review employment arbitration agreements and update them to maximize future enforceability of such agreements.